We recently published a list of Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. Since First Watch Restaurant Group Inc (NASDAQ:FWRG) ranks 10th on the list, it deserves a deeper look.
Jim Cramer in a latest program commented on the latest stronger-than-expected jobs report, calling it “good news” and expressed surprise at how the stocks “roared” on the report.
“For years, we have been taught that when buying yields go up, stocks go down. Ever since the Fed gave us that double rate cut last month, we have been afraid that they have been acting so decisively. Something might be wrong with the economy—something they knew about, but we didn’t.”
Jim Cramer was also surprised by bank stock gains. He said that these stocks probably rose because a strong employment situation means fewer bad loans. Cramer also said we might be heading to “no landing at all.”
“People have a collective sigh of relief that we weren’t headed for a crash landing. They held onto their stocks with both hands.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
First Watch Restaurant Group Inc (NASDAQ:FWRG)
Number of Hedge Fund Investors: 8
When asked about First Watch Restaurant Group, Jim Cramer said:
“Right now this restaurant group is very weird…. I’m worried about First Watch Restaurant Group Inc (NASDAQ:FWRG) being a competitive outfit. The multiple is way too high. I’m going to say no to that one.”
When First Watch reported weak Q1 results back in May, the bulls said the company would rebound as traffic declines were temporary. In that quarter the company saw a 4.5% year-over-year decline in same-restaurant traffic. The company noted weak traffic continued into Q2, citing challenging market conditions. Despite this, First Watch Restaurant Group Inc (NASDAQ:FWRG) outperformed the Black Box Casual Dining segment by more than a percentage point, reflecting its strong industry position.
What about Q2 results posted in August?
The company’s profits in the quarter rose by just a penny compared to last year. The initial market reaction to the guidance caused shares to drop in premarket trading; however, they later rebounded impressively, gaining double digits and ending a three-day losing streak.
System-wide sales rose by 10.1%, although same-restaurant sales growth was down 0.3% and same-restaurant traffic declined by 4% year-over-year. Total revenue climbed 19.5% to $258.6 million, surpassing estimates by $950,000. This resulted in an increase in the restaurant-level operating profit margin to 21.9% and an operating income margin of 6.4%. Adjusted EBITDA grew by $9.5 million to reach $35.3 million.
For FY24, First Watch Restaurant Group Inc (NASDAQ:FWRG) updated its projections, expecting same-restaurant sales growth to fall between negative 2.0% and flat, with same-restaurant traffic growth anticipated in the negative mid-single digits. This is a revision from previous guidance, which forecast flat to 2% growth for same-restaurant sales and low single-digit declines for traffic. Total revenue for FY24 is expected to rise by 17% to 19%, with adjusted EBITDA targeted between $106 million and $112 million, both unchanged from prior guidance.
Overall, First Watch Restaurant Group Inc (NASDAQ:FWRG) ranks 10th on Insider Monkey’s list titled Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. While we acknowledge the potential of First Watch Restaurant Group Inc (NASDAQ:FWRG), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FWRG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.